March 17: Daily Contrarian Reads

Even Goldman Downgrades Equities—–Says Asymmetry is Getting Worse

After numerous warnings from Goldman strategist David Kostin that stocks are expensive, most recently over the weekend when he wrote that  “investors will soon capitulate on their expectation of upside to 2017 EPS forecasts as they face the reality that the accretive impact from tax reform will not occur until 2018” and that “revisions to consensus EPS forecasts during the past few months have been negative for both 2017 and 2018” moments ago Goldman officially downagred equities. Warning that as a result of rising drawdown risk, a function of the “interplay of the cycle and rates”, with “growth momentum nearing its peak and rates increasing further with a hawkish Fed, the asymmetry for equities is turning increasingly negative

CBO Report on Trumpcare Confirms it—You Can’t Fix Stupid

This screaming headline “24 million Americans will lose their health coverage” is topping almost every story on the Republican Obamacare replacement plan now that it’s been studied by the Congressional Budget Office. But I have a better headline: “Government can’t fix stupid.” That’s the real takeaway because as it turns out, most of those 24 million people projected to “lose” coverage will be doing so of their own free will. Here are the CBO’s own words….. Bringing back major medical plans and eliminating the essential benefits requirements that make all insurance plans more expensive is a simple initial step. The second step is for the Republicans to fulfill another one of their longstanding promises and truly repeal Obamacare in total. That’s the only way for the government to simultaneously get out of the nanny state business and the crony capitalist practice of helping the insurance companies boost their customer base and stifle competition.

Something Snapped In February—-Department Store Sales Crash The Most On Record

… particular chart revealed in the latest monthly Bank of America debit and credit card spending report shows that things may be about to get a whole lot worse for America’s department stores, as well as malls where they are for the most part the anchor tenants. Of note: while official US retail sales data will be released tomorrow (BofA data always comes several days ahead of the official release), what is especially ominous is that the collapse in department store spending was the biggest on record.

The Fed’s Dot Plot Thickens—-Time to Pay Attention to The Folks Who Are Always Wrong

Michelle Marcussen, global head of economics at Societe Generale, writes in a research notes that “all eyes” will be on “the Fed dots.” “With a March fed funds hike now fully priced in, attention will turn to the quarterly update of the dot plot and any clues that Chair Yellen may offer at the press conference on the balance sheet,” she says in a research note. However, just as the dots have been inaccurate in the past, they might just be wrong about the future as well. But that may not matter for the immediate market reaction, which will hinge on how the Fed sees the future, not the future itself.

Here’s Another Record: 4.2 Million Student Loan Borrowers Are in Default

Roughly 1.1. million borrowers entered default on their Direct Loans, a type of federal student loan, last year, about the same as the previous year, according to an analysis of publicly available government student loan data by Rohit Chopra, a senior fellow at the Consumer Federal of America, a network of more than 250 nonprofit consumer groups. Overall, there were 4.2 million borrowers in default in 2016, up 17% from 3.6 million the year before, as some borrowers exited default while others remained in the red.

Another Sign of the Top—-Foreign Investors Pile Into US Commercial Real Estate After Blistering 7-Year Boom

2016 might later be called the peak year in terms of commercial real estate, or even the post-peak year, depending on the metric. Overall office sales in 2016 fell 7% from 2015, to $140.5 billion…..But graciously, foreign investors jumped in with both feet to help out..[T]he market has become a haven for offshore investors, who are pumping record amounts of capital into US office assets, especially in primary urban cores….Of the 50 largest office deals that closed in the US in 2016 – the trophies that get global attention – offshore buyers accounted for 43%!

The Donald’s Big Navy Fantasies—Or How To Win WWII in The 21st Century

Why do I mention this? Because I’m convinced that President Trump’s talk of rebuilding the U.S. military and “winning wars again” has been deeply influenced by the kind of iconography that was commonplace in Victory at Sea and the war movies of his youth. Consider his comments on February 27th, when announcing that he would request an extra $54 billion annually in additional military spending. “We have to start winning wars again,” he declared. “I have to say, when I was young, in high school and college, everybody used to say we never lost a war. We never lost a war, remember?”

Oil at $40 No Problem as U.S. Drillers Snub OPEC With Hedges

OPEC’s worst enemy isn’t U.S. shale drillers. It’s the hedges propping them up. American oil explorers who survived the worst of the 2014-2016 market rout are shrugging off the 14 percent slide in prices this year from a high of $55.24 to less than $48 a barrel Tuesday. The price would have to drop to the $30s or lower to dent the bottom line of many drillers now working U.S. shale fields, said Katherine Richard, the CEO of Warwick Energy Investment Group, which own stakes in more than 5,000 oil and natural gas wells.

The Dollar Is Not Real Money… America Is No Real Republic

As the great Italian economist Vilfredo Pareto explained, no matter what you call your government, over time, it will be taken over by the cunning insiders and hustlers he called “foxes.” There are always some smart people able to manipulate, control, and subvert the government and use its police power (governments claim a monopoly on the use of violence) to get what they want. What do these foxes want? Money. Power. Status. The usual…’s really very simple: You spend your time earning money. The foxes spend their time figuring out how to get it from you – by taxation, legislation, regulation, or an ingenious phony-money system.

Steve Bannon and the Making of an Economic Nationalist

On Oct. 7, 2008, in the cramped TV room of his modest home here, Marty Bannon watched with alarm as plunging stock markets dragged down his shares of AT&T, the nest egg he built during a 50-year career at the company. His five children, including current White House counselor and chief strategist Steve Bannon, had often joked growing up that their devout father, a product of the Great Depression, would sooner leave the Catholic Church than sell those shares. The stock symbolized his deep trust in the company and had doubled as life insurance for his children. As he toggled between TV stations, financial analysts warned of economic collapse and politicians in Washington seemed to mirror his own confusion. So he did the unthinkable. He sold………Marty Bannon, now 95 years old, still regrets the decision and seethes over Washington’s response to the economic crisis. His son Steve says the moment crystallized his own antiestablishment outlook and helped trigger a decadelong political hardening that has landed him inside the West Wing, just steps away from President Donald Trump.